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RAC Magazine is the leading source of news, information and analysis for the refrigeration and air conditioning industry. For over a century, RAC has provided decision makers with unrivalled coverage of the latest technical innovations that drive this sector.

Time to provide a reality check

President of the Building & Engineering Services Association has added a note of caution to the buoyant mood among contractors captured in the association’s latest state of trade survey.

The members of the B&ES are enjoying rising order, enquiry and turnover levels, according to the association’s latest state of trade survey.

Responses to the survey, which covered the period from January to June, revealed a positive “net optimism measure” of 45 per cent, up from 39 per cent six months ago, confirming that B&ES members in all regions – and of every size and specialism – are feeling positive about their future business prospects.

Growth in order levels was experienced by 53 per cent of respondents – compared with 47 per cent in the second half of 2014, while 41 per cent enjoyed an increase in enquiries and 40 per cent an increase in turnover.

An improvement in tender prices was also detectable.

For the first time since the six-monthly B&ES survey was introduced in 2012, more members reported a rise than had experienced a decline.

Labour and material costs were both seen to increase – while 36 per cent of firms claimed to be employing more direct labour than six months ago, and 40 per cent expected workforce levels to increase further during the remainder of 2015.

There was also a rise in the number of members taking on apprentices and making use of agency personnel.

However, a range of concerns continue to temper members’ optimism. These include skills shortages, zero and ultra-low margins, over-long tender lists and the prevalence of late payment.

B&ES chief executive Paul McLaughlin says the findings confirm the anecdotal evidence already garnered from members that the construction industry and the building engineering services sector continues to enjoy a sustained, if still sometimes tentative, recovery.

“I am also pleased that firms are responding to the challenge posed by skills and labour shortages by stepping up their training activity so as to take full advantage of the commercial opportunities that are available to them,” Mr McLaughlin says.

“The optimism which is clearly spreading throughout the membership augurs well for our sector as a whole”.

B&ES president Jim Marner congratulated his fellow contractors for stepping up training and recruitment activities, including taking on more apprentices, which he believes will be crucial if the building services sector is to take full advantage of the growing market and improving economic picture.

Further and faster

However, efforts to address skills shortages and improve productivity must go further and faster in the coming months, Mr Marner believes. He also warned against the dangers of what he called “soaring and unsustainable labour costs” that threaten profit levels and provide a reality check to the overall mood of optimism.

Mr Marner strongly urged employers to resist the temptation to “take the easy option” of cherrypicking the best staff from competitors in order to resource projects.

“It is clear that companies are casting around desperately looking for skilled staff and it is not uncommon for whole project management teams to be head-hunted from one contractor to another, but that doesn’t solve the underlying problem,” says Mr Marner.

“It is great that our most skilled people are getting the recognition and financial rewards they deserve, but we need to focus heavily on increasing the numbers of skilled people available and also on equipping our workforce with the new skills required by the modern construction market.

Directly employed skilled labour from within the supply chain is the ideal solution, but employment agencies, who support investment in training will also play their part.”

The secret to improving onsite productivity is a complex issue that includes better co-ordination of the supply chain so that people can operate more effectively, he says: “It means delivering materials to site on time; providing accurate design drawings; and helping firms throughout the supply chain to use productivity tools like Building Information Modelling [BIM], which also makes it possible to prefabricate elements of the build off site.”

He says there was also a link to late payment, which would need to be resolved in order to restore trust and confidence in companies, so that they feel able to invest for the future.

Bigger challenge

The B&ES survey revealed that 36 per cent of firms claimed to be employing more direct labour than six months ago, and 40 per cent expected workforce levels to increase further during the remainder of 2015, but Mr Marner believes firms face a bigger challenge than following previous recessions.

“Technology is transforming construction. Our work now sits at the heart of the Big Data age with some of the world’s biggest companies – Apple, Google, IBM etc – spending millions on technologies specifically aimed at improving the operation of buildings.

We need to make sure we are fully engaged at that end of the project chain and have the skills to keep pace.”

He points to a recent survey carried out by the CBI showing that 73 per cent of contractors find it difficult to recruit the higher skilled staff they need to keep up with growing demand for quality buildings.

The CBI was also concerned the government’s approach to apprenticeships would not deliver the high-quality, business-relevant training needed – possibly because they are falling into the trap of playing a numbers game rather than focusing on appropriate, quality skills.

CBI deputy director-general Katja Hall said the government had set out its stall to create a high-skilled economy, but that companies had a pressing “skills emergency” now, threatening to starve economic growth.

She added: “It is the high-growth, high-value sectors with the most potential [that are] under most pressure… including construction.”.

“From a building engineering services perspective, that has to mean putting the right people into the right jobs and equipping them with the tools they need to work to the best of their ability,” says Mr Marner.

“This is a huge supply chain challenge because it also depends on people working collaboratively to ensure information is shared and projects are well co-ordinated.”

He also calls on the government to play its part. “If the government wants to see its infrastructure targets met and its housing and commercial building standards reached, then it has to help the industry by marketing engineering and supporting employers to invest in apprenticeships.

Employers in our sector have had a tough decade and are still nervous about investing in people if they are uncertain about what the future holds.

But, the government can help, he stresses. “The government can bridge the gap by providing financial support to encourage employers to take young people on now so they are self-sustaining by the time future projects are up and running.”

Kevin Glass uses his inaugural speech to set out the direction of his tenure with aims to build on its existing skills and education work, while also warning of potentially significant Brexit disruption

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RAC Magazine is the leading source of news, information and analysis for the refrigeration and air conditioning industry. For over a century, RAC has provided decision makers with unrivalled coverage of the latest technical innovations that drive this sector.